Correlation Between Vanguard Health and Alger Smidcap

Can any of the company-specific risk be diversified away by investing in both Vanguard Health and Alger Smidcap at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vanguard Health and Alger Smidcap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Health Care and Alger Smidcap Focus, you can compare the effects of market volatilities on Vanguard Health and Alger Smidcap and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vanguard Health with a short position of Alger Smidcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Health and Alger Smidcap.

Diversification Opportunities for Vanguard Health and Alger Smidcap

-0.29

Correlation Coefficient

Vanguard Health  Alger Smidcap

Very good diversification

The 3 months correlation between Vanguard and Alger is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Health Care and Alger Smidcap Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Smidcap Focus and Vanguard Health is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vanguard Health Care are associated (or correlated) with Alger Smidcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Smidcap Focus has no effect on the direction of Vanguard Health i.e., Vanguard Health and Alger Smidcap go up and down completely randomly.

Pair Corralation between Vanguard Health and Alger Smidcap

Assuming the 90 days horizon Vanguard Health Care is expected to under-perform the Alger Smidcap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Health Care is 1.11 times less risky than Alger Smidcap. The mutual fund trades about -0.19 of its potential returns per unit of risk. The Alger Smidcap Focus is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,377  in Alger Smidcap Focus on October 26, 2024 and sell it today you would earn a total of  154.00  from holding Alger Smidcap Focus or generate 11.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Vanguard Health Care  vs.  Alger Smidcap Focus

Vanguard Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Health Care has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Alger Smidcap Focus

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Smidcap Focus are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Alger Smidcap may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vanguard Health and Alger Smidcap

The main advantage of trading using opposite Vanguard Health and Alger Smidcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Health position performs unexpectedly, Alger Smidcap can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Alger Smidcap will offset losses from the drop in Alger Smidcap's long position.

The idea behind Vanguard Health Care and Alger Smidcap Focus pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.